Explain why individual firms in competitive markets face more elastic demand curves than the market as a whole
What will be an ideal response?
In a competitive market, if an individual firm increases its price it will lose all of its customers, as consumers simply buy from another firm. However, if the price of the good increases for all firms some consumers will not continue to buy the good, but for many prices some consumers will continue to purchase the good.
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Which of the following statements concerning income and substitution effects is not true?
a. Income and substitution effects cause the demand curve to slope downward. b. When the price of a good falls, real purchasing power increases and consumers can purchase more of all goods. c. The substitution effect describes the situation in which more of the good whose price has fallen is purchased, and less of all other goods is purchased. d. A price decrease of one good cannot cause the income effect. e. Income and substitution effects are related to diminishing marginal utility and consumer equilibrium.
What type of policy does the government adopt in dealing with government-inhibited goods?
A) It subsidizes their consumption. B) It subsidizes their production. C) It provides them as public goods. D) It taxes, regulates, or prohibits their use.